Mom And Pop May Finally Be Returning To The Stock Market (SPX, SPY, DIA, DJI, QQQ)

Friday

Feb 28, 2014 at 9:01 PM

Matthew Boesler

The stock market crash of 2008 has for many years caused an aversion to stocks among retail investors, but they may finally be coming back after a 188% run-up from the March 2009 lows.

Daily average revenue trades (DARTs) at leading online brokerage E*TRADE have been trending up since bottoming out in mid-2012, but in January, this metric soared 26% from the previous month to 195,652, marking the biggest monthly gain in nearly three years.

Now, E*TRADE DARTs — a common measure of the amount of commission-generating trades taking place per day on average over the course of a given month — are at the highest level since May 2010, suggesting trading activity has risen 61% since mid-2012.

Tom Lee, chief U.S. equity strategist at JPMorgan, thinks this is a good sign.

"Skeptics have argued to us that individual investors, who have pulled more than $345 billion from equities since 2007, are not likely to return to markets for years, maybe decades," says Lee in a weekly note to clients.

"This re-engagement by individual investors, we believe, is a positive and is naturally supportive of improving valuations and liquidity for stocks."

Of course, skeptics are likely to counter that such a surge in interest in the stock market at the retail level could be a contrarian indicator, suggesting the market's biggest gains are behind us at this point. However, that is unlikely to be taken as a controversial view, given the market's stellar performance in recent years.

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